On July 19, 2009, my wife Mary asked me to help her move a box of my papers stored in the garage since my retirement in 2001. In the box I found the manuscript for The American Iceberg with “A Letter to the Citizens of the 21st Century” dated July 19, 1979. I checked my calendar to be sure of the date. Yes, it was July 19, 2009. What an amazing coincidence. Exactly 30 years later to the day, I could read what I had written about the debt crisis then. It was like reading current headlines, for the United States is struggling now with the very exponential debt growth process that alarmed me in 1979. I immediately began scanning the manuscript into my desktop computer so that I could update it.

Green Capitalism – How it can save our planet

By Keith Mcilroy

“We CAN live a life of limitless economic growth on a planet of limited resources”

In the last 12 years the global economy has doubled to US $70 Trillion.
During that same time oil is close to peaking, fresh water demand has ballooned, waste mountains have piled up and greenhouse gases have driven changes to our climate. If we continue at that growth rate the global economy will be US $700 Trillion per annum by 2050 and over US $11,000 Trillion by the end of this century.
Can we have a global economy 160 times bigger than today?

Economics of Freedom : What Your Professors Won’t Tell You

Selected Works of Frédéric Bastiat

The Economics of Freedom presents some of Bastiat’s most important essays. They reveal a sharp mind systematically debunking one fallacy after another and a moral conscience that recoiled from violence and tyranny. To read and understand “What Is Seen and What Is Not Seen” is to contemplate the world in a new light. It is one of the most important essays ever written in Economics. In addition to Bastiat’s writings, this book includes two essays that show the importance of Bastiat’s ideas and then update and apply them to more contemporary issues.

Have you ever been witness to the fury of that solid citizen, James Goodfellow, when his incorrigible son has happened to break a pane of glass? If you have been present at this spectacle, certainly you must also have observed that the onlookers, even if there are as many as thirty of them, seem with one accord to offer the unfortunate owner the selfsame consolation: “It’s an ill wind that blows nobody some good. Such accidents keep industry going. Everybody has to make a living. What would become of the glaziers if no one ever broke a window?”

Now, this formula of condolence contains a whole theory that it is a good idea for us to expose, flagrante delicto, in this very simple case, since it is exactly the same as that which, unfortunately, underlies most of our economic institutions.

The advantages that you and your neighbor found respecting each other’s life and property and engaging in trade are multiplied many times in a market where many people can buy and sell. With many buyers, you might be able to sell as many turkeys as you can hunt. Your investment in the bow and arrows can be fully utilized and you can increase your income many times.

The Emergence of Money

When you were alone in the island, your time was your money. You would convert your time into products by working in the production processes of those products. With your neighbor, you could exchange a product of value that you produced for a product of value that he produced. This is called barter. For the market, a common media of exchange emerges naturally because it is difficult to find a coincidence of wants. It is difficult to find a person that will have the product that you want and at the same time that person will want the product that you have.

This common media of exchange that facilitates trade is called “money”. Any product that has demand in the market could be used as money but the market will prefer a product that is not perishable, that is portable, that is divisible, and that has a constant value. Instead of asking the buyers of your turkeys to give you a product that you want in exchange for your turkeys, you would be willing to exchange the turkeys for another product that would be accepted by everybody. You could later exchange this other product for the things that you really need.

Let’s say that to build an extra room in your shelter you would need several hundred bundles of palm leaves that can be tied up side by side to form the walls and the roof of your shelter. Let’s say that it takes one hour to build one bundle. If everybody in the market wants to build an extra room to their shelters, the bundles of palm leaves would be widely accepted. These bundles could be used as a common media of exchange. This common acceptance and their non-perishability make the bundles a good currency but their weight does not. Instead of carrying the bundles around to make transactions, assume that there is enough trust in the market such that everybody will accepts a piece of paper stating the number of bundles that you have available. The trust would be based on everybody abiding by the rule that all these paper notes are backed by a one hundred percent existence of the bundles. This would the start of paper money. The paper stating the amount of bundles that you have could be used as a common media of exchange and it would not be heavy. …

This is the second book of the “Wealth of the People” book series. The series is an inquiry about the requirements for the production of wealth in a society.

The first book looked at the economics of Robinson Crusoe alone in an island and concluded that to produce wealth you have to work using your capital structure. The amount of investment in your capital structure determines the income that you can make with your work. Your capital structure is composed of tools that make your physical capital and the knowledge to make them and use them, which is called your human capital.

The second book looks at the requirements for the wealth production process to continue when you find a neighbor in the island. An agreement to respect life and property emerges as a requirement for the wealth production process to continue and becomes a factor of production. This agreement and other agreements that will be discussed later can be grouped under the concept of “Social Capital”, defined as the existence of agreements between two or more individuals that are needed for the wealth production process to continue. Social capital becomes a requisite for the capital structure to function and in this way becomes a factor of production and a determinant of the income that you and your neighbor can make.

The rest of the titles of the “Wealth of the People” series are listed at the end of this book.

Introduction

The second book of the series “The Wealth of the People” is about the relationship that you need to have with a neighbor in the island if you want to preserve and increase your income. You have to make an agreement with your neighbor of mutual respect for life and property. This agreement preserves the status quo so that each of you can continue working in your respective wealth production activities. Once this agreement is in place, you will find out that you can increase your income through trade. By trading products, your advantage in a wealth production process can be passed to your neighbor in a voluntary agreement that occurs because there is profit for both parties. A simple example shows that both of you can increase your income through trade. It is an economic conclusion of the book that it is to the advantage of both parties to respect each other’s life and property and to engage in free trade.

* * * * *

The Wealth of the People:

Your Neighbor’s Wealth

An Inquiry into the Relationship between

Wealth, Freedom, and Life

* * * * *

Your Neighbor

In book one you were alone in an island working hard to survive and building up your capital structure and one day you find out that there is another person living in the island. How would you approach this person? The first question in your mind would be whether this person will be friendly or hostile. Hostility is a real possibility. Remember that the first people that Robinson Crusoe encountered in his island were cannibals. You would want to know if your neighbor is a threat to your life or a potential friend.

Maybe your neighbor is not a cannibal, but he might be tempted to steal your food and tools. As a result of your work and your investment, you should possess some perishable products, some durable goods and some tools. Your neighbor might be tempted to take them all away. Would he be strong enough to try it? Does he have a superior weapon like Robinson’s musket that he might be tempted to steal your possessions with impunity? Maybe he is part of a tribe that might enslave you?

It could also be that your neighbor discovers that you exist in the island and he thinks that you are the threat. Maybe he will be afraid of you and maybe you are the one that is capable of stealing his possessions. …

The wealth of a nation is its people. If this is true, why are there so many nations that have so many people that are not wealthy? What is missing?

Ask a citizen of wealthy country to explain why this is so and he might have some notion that he will express with insecurity. Ask a citizen of a poor country why his country is not wealthy and he will have plenty of blame to throw around but chances are that he might not even have a notion. It is a simple question with a complex answer. If it had an easy answer, everybody would answer correctly. Why some nations are wealthy and some others are not? The answer must have elements of economics, philosophy, political science, history, business, psychology, religion, and other disciplines. This series of books is an attempt to break this complex answer into simple elements that might be easily explained. This will attempted by reviewing one element in each book, starting with simple elements and building up to more complex conclusions.

This is the first book of the series. It is about the wealth of a single person in an island. The titles of the rest of the series are listed at the end of this book.

Introduction

I have been blessed with the experience of living in two countries. One is a wealthy country and the other is a country in development, which is a nice way to say that it is not wealthy. The one in development is older telling us right away that age is not a cause of wealth. I have experienced the contrast of the living, business, cultural, and political conditions in both countries and this experience has fueled a desire to try to explain the differences. This bicultural experience, an interest in economics, and an education in engineering might allow me to have a unique perspective on the subject.

The first book is about producing wealth in a desert island, just like Robinson Crusoe in Daniel Defoe’s novel. Welcome to the first book.

* * * * *

The Wealth of the People:

Your Wealth

An Inquiry into the Relationship between

Wealth, Freedom, and Life

* * * * *

Alone in an Island

Imagine that you are the sole survivor of a shipwreck in an island. Instead of having the benefits of the remains of the shipwreck as Robinson Crusoe had, all you have are the clothes that you are wearing. What would you have to do to survive?

You would have to fill your basic needs with your bare hands. You would have to find out how to satisfy your thirst and hunger. You would have to find or build a shelter to sleep at night free of any wild animals or nasty insects. Eventually you would have to make clothes to replace the ones you are wearing.

The Definition of Wealth

Upon your arrival in the island you would be poor. To be wealthy is to have plenty of resources to sustain your life. You have your mind and your body which are very valuable but they would not be sufficient to make you feel wealthy. You would want to have plenty of water, food, clothing, and a good shelter.

Your Assets

To satisfy your needs, you would have to use your mind and your body. Your mind and your body are your assets. You would have to use your mind to think where to find water to drink and you would have to use your legs to walk until you find it. You would have to think what vegetables to eat and walk to collect them. You have to use your assets, which at this point are only your mind and your body, to produce the products that you need.

The Natural Resources

To satisfy your needs you would also have to use the natural resources of the island. You would have to find fresh water in a creek that you could drink without getting sick. You would have to pick vegetables that you could eat. You would have to find out how to hunt an animal. You will have to figure out how to start a fire to cook the animal. You would have to use earth material, such as mud, stones, and sticks, to build a shelter.

1. What is Political Economy? Political Economy treats of the wealth of nations; it inquires into the causes which make one nation more rich and prosperous than another. It aims at teaching what should be done in order that poor people may be as few as possible, and that everybody may, as a general rule, be well paid for his work. Other sciences, no doubt, assist us in reaching the same end. The science of mechanics shows how to obtain force, and how to use it in working machines. Chemistry teaches how useful substances may be produced—how beautiful dyes and odours and oils, for instance, may be extracted from the disagreeable refuse of the gasworks. Astronomy is necessary for the navigation of the oceans. Geology guides in the search for coal and metals.

Suppose that in the early stages of society, the bows and arrows of the hunter were of equal value, and of equal durability, with the canoe and implements of the fisherman, both being the produce of the same quantity of labour. Under such circumstances the value of the deer, the produce of the hunter’s day’s labour, would be exactly equal to the24 value of the fish, the produce of the fisherman’s day’s labour.